Saving for children's post-secondary education | Kerr Financial
Financial Planning
Am I saving enough for my children’s post-secondary education?
Category: Financial Planning

Whether your children are pre-schoolers or your youngest child is graduating from high school, our clients ask us if they are saving enough for their children’s post-secondary education.  The rising cost of tuition fees is something they are all concerned with and which we all saw come to a crisis in Quebec with the Student Protests last year.  The facts speak for themselves.  Statistics Canada has recorded increases in Tuition Fees that are on average 4.1%1 higher in 2011/2012 versus prior year.  Digging beneath the ‘averages’ we find that tuition fee increases vary greatly with increases ranging between 0.1%-10.7%1, depending upon the program, with Medicine having had the highest increases at 10.7%1. The increases and tuition costs also vary considerably depending upon the province with Ontario currently ranked as most expensive and Newfoundland least.

Looking at the current cost of a selection of Canada’s top Universities, the annual cost varies considerably depending upon your area of study and school.  University costs for programs and schools we reviewed varied from $17,900 to $35,800 annually.  Projecting the annual costs and assuming a 6% increase annually, in 5 years it would cost as much as $24,000 to $47,900, and in 10 years as much as  $32,100 to $64,100.  Clearly with the cost of University Education on the rise, it is becoming even more important to ensure we are saving enough.   That coupled with the fact that it is estimated that as much as 75%2 of new jobs will require a university education, underscores the importance of proper financial planning.

So how much would you need to save annually to cover the cost of a 4 year University Degree in 10 years?  The cost could be as much as $14,500 per year!  This assumes an annual cost of $40,000/year for 4 years, and that you have 10 years until your child begins University.

With careful financial planning, taking advantage of RESP’s and Government Grants you can reduce the amount you need to save annually by over 20% per year.  Ask your financial advisor to review your education savings strategy to ensure you are making the most of the available programs and resources.

* Note that the costs for McGill are for the ‘Out of Province Tuition’ which is approximately 2 times the cost of tuition for residents of Quebec.
**All #’s are rounded to the nearest 100’s and are based on information posted on the respective University website.  Where there was a difference in the tuition cost by year of program, the cost selected is for the 1st year of the program. Meal Plans assume the maximum program available is selected and the residency cost is based on the actual cost of a single room for 2 semesters (Sept-Dec & Jan-Apr).
1 Statistics Canada
2 University tuition rising to record levels in Canada – CBC News Posted September 11, 2013 by Marlene Habib
3 Calculation of savings required is based on an assumed after tax rate of return of 3%, beginning investment balance of 0, your child will begin the program in 10 years, and the total cost will begin at $40,000 per year, increasing by 6% annually.
4 The amount required to be saved annually decreases by over 20% assuming an annual rate of return of 7% assuming you are saving within an RESP and TFSA taking advantage of the maximum government grant of $500 annually.

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Kerr Financial Group was formed in 1979 for the purpose of assisting individuals to maximize their personal financial resources, alleviate their financial and retirement concerns and simplify the administration of their affairs.

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